SPIRITS giant Pernod Ricard cheered investors by declaring it remains on track to achieve profit expectations for the longer term at the upper end of guidance, despite reducing its sales estimate and share buyback for the current year.

The owner of Dumbarton-based Chivas Brothers, which makes Ballantine’s and Chivas Regal blended Scotch whiskies, reported a “robust performance” for the first half as it dealt with the “normalisation” of the spirits market, following “two years of outstanding growth”.

Major drinks companies such as Pernod and rival Diageo have faced trickier conditions in recent months amid the challenging macroeconomic environment and tough comparisons with the immediate post-pandemic market when sales were boosted by the re-opening of travel retail and hospitality sectors across the world.

Paris-based Pernod had reported a “soft” start to its current year as it reported first-quarter results in October and followed that yesterday by announcing that it had turned in a “robust” showing over the first half, although it now expects sales for the year to be “broadly stable”.

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First-half profits fell by 3% to €2.14 billion on sales down 3% to €6.59 billion but Pernod, which also makes premium spirits such Absolut vodka and Jameson Original Irish whiskey, said it was “confident in our medium-term financial framework of +4% to +7% top line growth, aiming for the upper end of the range”.

Shares in the company, which are listed on the main French and European indices, surged more than 6% yesterday morning despite cutting the value of this year’s share buyback. It now plans to return $300m via buybacks this year, having previously planned to buy back between €500m and €800m.

The share price eased over the day and closed up 1.78%, or €2.75, at €157.50.

Alexandre Ricard, chairman and chief executive, said: “We delivered a robust performance in the first half of the year, as we confidently steer Pernod Ricard through the normalisation of the spirits market, following two years of outstanding growth.

“We achieved strong gross margin expansion on the back of substantial pricing actions, thanks to the power of our premium portfolio. With a diversified footprint spanning mature and emerging regions and a broad presence across spirits categories, we are able to weather volatility and continue to gain share in many markets.

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“I am convinced that our sound strategy, together with the dedication, agility, and exceptional engagement of all our teams around the world, will enable us to deliver our ambitions.”

Pernod said net sales in its key US market dropped by 7%, reporting that consumer demand had been “resilient” against tough comparisons with the year before, as the spirits market continued to normalise. It expects sales to improve in the second half on the back of “strong brand activations, despite further inventory adjustments”.

Elsewhere in the Americas, where there was a 7% fall in sales across the region, Brazil and Mexico also came up against though comparisons though improvement is also expected in the second half.

Sales in China tumbled by 9% amid a softening of demand in a “challenging macro environment”, with trade sentiment said to have been “cautious” ahead of Chinese New Year. However, sales rose by 4% in India, where demand for spirits was strong. Strong growth is also anticipated in India in the second half.

First-half sales in Europe were down by 4%, with a resilient performance in western Europe, led by Germany, offset by softer sales in France, the UK and “normalisation” in Spain. Global travel retail sales fell by 3% amid the “ongoing normalisation of passenger traffic”, which Pernod said was now at around 95% of pre-Covid levels. The recovery of travel retail is lagging in China, the company added.

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Pernod's Chivas Brothers reported a 6% fall in sales in the first half against a "high comparison basis". Sales of Ballantine's and Chivas Regal dipped by 8% and 7% respectively, with The Glenlivet down by 5%. However, Royal Salute saw an 8% rise in sales, boosted by luxury releases.

Jean-Etienne Gourgues, chairman and chief executive of Chivas Brothers, said: “Our H1 FY24 performance paints a clear picture of whisky market normalisation while also demonstrating the positive impact of strategic business decisions made in line with our premiumisation strategy.

 “Whisky is a long-term game: we remain focused on our ambition to open up to new markets and consumers through product innovations and brand experiences.”